Topic: Jurisdiction of the Court to try the matter where there is an Arbitration Clause
Date of Judgment: 27 June 2024
Court: High Court of Uganda at Kampala (Commercial Division)
Case Number/Citation: Miscellaneous Application No. 2966 of 2023, arising out of Civil Suit No. 1466 of 2023, 2024 UGCommC 184
Judge: Hon. Lady Justice Patience T. Rubagumya
Summary Facts of the Case
The Respondent filed Civil Suit No. 1466 of 2023 against the Applicant seeking various orders, including a declaration of breach of the Memorandum of Understanding (MoU) signed between the parties on 27 January 2022, recovery of USD 7000 for unpaid rent arrears/fees, recovery of lost commission amounting to USD 220,320 and UGX 12,785,000 as operational costs, general damages, and costs of the suit.
The MoU between the parties contained an arbitration clause (Clause 11), which stipulated that disputes should first be resolved amicably and, failing that, be referred to arbitration.
The Applicant argued that the court lacked jurisdiction due to the arbitration clause and sought to have the suit dismissed or referred to arbitration.
The Respondent argued that since the Applicant allegedly failed or refused to participate in the settlement of the dispute amicably then it had lost the right to arbitrate and therefore Clause 11 was inoperative and incapable of being enforced.
Legal Issues Before the Court:
- Whether Civil Suit No. 1466 of 2023 is competent before the court.
- What remedies are available to the Parties?
The Decision of the Court
The Court ruled that the arbitration clause in the MoU was valid, enforceable, and binding upon the parties.
Citing the decision of Justice Steven Mubiru in Lakeside Dairy Limited Vs. International Centre for Arbitration and Mediation Kampala and Midland Emporium Limited, the Court held that where the parties have explicitly expressed their intention to settle their disputes through arbitration, the Court should give effect to such intention even if certain aspects of the agreement may be ambiguous, inconsistent, incomplete or lacking in certain particulars.
Referring to the case of Broken Hill City Council v Unique Urban Built Pty Ltd [2018] NSWSC 825, the Court stated that the term “inoperative” as used in Section 5 (1) of the Arbitration and Conciliation Act which provides for exceptions under which Court may intervene in a matter subject of Arbitration, means having no field of operation or being without effect. It covers situations where the arbitration agreement has ceased to have effect due to various reasons, such as the parties having implicitly or explicitly revoked the agreement to arbitrate, or the same dispute between the same parties has already been decided in arbitration or court proceedings (principles of res judicata), etc.
On the other hand, the term “incapable of being performed,” per the case of Lucky-Goldstar International (HK) Ltd Vs NG Moo Kee Engineering Ltd [1993] HKCFI 14 relates to situations where the arbitration cannot effectively be set in motion. Specific instances include: An arbitrator specifically named in the arbitration agreement refuses to act, or an appointing authority refuses to appoint or the parties had chosen a specific arbitrator in the agreement, who was, at the time of the dispute, deceased or unavailable, etc.
Key Quote: “Since arbitration agreements are purely matters of contract, and the effect of Section 5 (1) of the Arbitration and Conciliation Act is to make contracting parties live to their agreement by disallowing any of them to refuse to perform part of their contract when it becomes disadvantageous to them, in the instant case, the parties in my considered view negotiated the arbitration clause and included the same for good reasons. It would not be fair for the Court to disregard the parties’ intention especially where no waiver or in operation of the arbitration clause has been proved. Accordingly, I am inclined to invoke Section 5 (1) of the Arbitration and Conciliation Act, which requires this Court before which these proceedings have been brought in a matter which is the subject of an arbitration agreement, to refer the matter back to arbitration.” – Lady Justice Patience T. Rubagumya.
Law Applied
- Sections 5 and 9 of the Arbitration and Conciliation Act, Cap. 4
- Lakeside Dairy Limited Vs. International Centre for Arbitration and Mediation Kampala and Midland Emporium Limited Misc. Cause No.21 of 2021
- Lucky-Goldstar International (HK) Ltd Vs NG Moo Kee Engineering Ltd [1993] HKCFI 14
Counsel on Record
- For the Applicant: Learned Counsel Munguriek James of M/s Barenzi & Co. Advocates
- For the Respondent: Learned Counsel Wande Anthony of M/s Nsereko-Mukalazi & Co. Advocates
Conclusion
This case demonstrates the limited role of the Court in matters subject to an arbitration clause or agreement.
It illustrates the Court’s respect for arbitration as an alternative dispute resolution mechanism if agreed upon by the parties.